This is because, he cannot disregard demand situation in the market. Though a monopolist is a price-maker, he has limited power to charge a high price for his product in the market. Since a monopolist has complete control over the market supply in the absence of a close or remote substitute for his product, he can fix the price as well as quantity of output to be sold in the market.There are legal, technological, economic or natural obstacles, which may block the entry of new firms. A pure monopolist has no immediate rivals due to certain barriers to entry in the field.
That means it cannot sell more output unless the price is lowered. A monopoly firm itself being the industry faces a downward-sloping demand curve for its product.Thus, in a competitive industry, there is single ruling price, while in a monopoly there may be price differentials. He can vary the price from buyer to buyer. He is in a position to fix the price for the product as he likes. In fact, his price fixing power is absolute. A monopolist is a price-maker and not a price-taker.Monopoly is a complete negation of competition.They have either to buy the product or go without it. Therefore, the buyers have no alternative or choice. There are no closely competitive substitutes for the product.Thus, under monopoly firm and industry are identical. The monopolist is the single producer in the market.The characteristic features of a monopolistic firm are: “Monopoly is a market situation in which the firm is independent of price changes in the product of each and every other firm.” Prof.
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